Are Search Engines Too Expensive for Small Businesses? – Business of Doing Business – The Journal of Antiques and Collectibles –
By Ed Welch
Five years ago, search engine services were free to businesses large and small. I, for one, could never figure out how a search engine company could stay in business while giving away its primary product. I never did buy the notion that it was somehow acceptable to lose money in order to capture market share. I was not the only one. When the stock market technology bubble burst in the spring of 2000, technology companies, including search engine businesses, started going out of business. I was not surprised: How could any company that loses money as part of its business plan stay in business?
In a bold move to save itself, Yahoo did something that no search engine had ever done: It began charging a fee for their services. Moreover, the fee was an impressive $400 per page. Many Internet professionals were of the opinion that Yahoo had shot itself in the foot. I thought that it had shot itself between the eyes.
Both bullets missed! To the surprise of nearly everyone, large companies and major corporations were willing to pay $400 and more. Within a few months, nearly all search engines followed Yahoo’s lead and began charging for their services. By 2000, less than a year after Yahoo first instated the fee, the entire nature of Internet search engines changed. What had been a free service had became a paid service.
The question for the next year was how much could a search engine company charge for something that had always been free? Was yahoo’s $400 excessive? Was it possible to charge $10 per page and make money with volume?
Yahoo’s $400 fee proved to be too expensive, while $10 a page proved to be too cheap. Most leading search engines now sell a package priced between $100 and $200. Yahoo now charges $299 per page. Some search engines, Google for example, charges up to 15 cents per click. Considering that thousands of people are likely to click on your page each month, 15 cents per click can prove to be very expensive. Some search engines, Overture for example, pull no punches when it comes to paying for performance. The more money you are willing to pay, the higher your page will appear in their search results. If you, or your ad agency, lack programming skills, you can simply buy your way to the top. I will have more to say about Overture later.
The Winners and the Losers
Search engine companies are big winners in this situation. They are now being paid for their services. Big companies and major corporations are winners because they do not need to hire search engine specialists or maintain a large Internet department. For less money than the cost of several employees, they can buy preferred search engine placement.
Small businesses already established on the Internet are very big winners. Competition from other small businesses who do not have the ability to pay or those not willing to pay has all but disappeared. Search engine users are winners, too. The Internet is no longer cluttered by homemade pages, child-made pages, and pages created by hobbyist. A search on any subject will return results more relevant to the query.
The losers are small businesses, especially antique-related small businesses not yet on the Internet. Historically, antique dealers do not advertise. Paying for search engine placement is paying for another form of advertising.
Is Internet selling still an option for small businesses, especially antique-related small businesses? The answer is, yes. But only for dealers and owners willing to pay search engine fees. In addition, small business owners must buy into advertising promotions sponsored by search engines. This includes paying a fee for a high ranking on certain keywords. If you for sell Old Ivory china and want your page to rank high in any search for “Old Ivory china,” you must buy that keyword and you must buy that keyword from more than one search engine. If you sell 10 unrelated types of antiques, you must buy all 10 keywords in several search engines. Obviously, this could cost several thousand dollars each year.
Dealers have two options for active Internet selling, the homepage and the eStore. At one time, Internet auctions offered a profitable third option. Today, Internet auction prices are so depressed that this option is out except for low-end collectibles.
The homepage is, by far, the best option for small business selling on the Internet. As little as five years ago, it was possible to create a working homepage that produced tens of thousands of dollars in sales each year for less than $1,000. Today, a well-programmed homepage will cost a minimum of $5,000 and is more likely to cost close to $10,000. This figure is for year-one start up expenses. Ongoing year-to-year expenses for search engine fees, site storage, and technical assistance will run between $3,000 and $5,000.
A yearly budget of $5000 is compatible in cost to doing shows or displaying at several well-run and well-advertised group shops. At one time I displayed at more than 20 major antique shows each year. The cost of each show was more than $1,000 when booth rent, hotel, and travel expenses were considered. In fact, several of the shows cost more than $2,000. (Anyone who does the major Miami shows knows what I am talking about.) I consider search engine expenses cheap when compared to antique show expenses.
eStores are often confused with a homepage, however eStores do not stand alone on the Internet. They are part of a group. eStores are the Internet equivalent of the group shop. The advantage of opening an eStore is that they are inexpensive to establish and maintain. Most eStores have either no or a modest start up expense. Ongoing expenses are about $1 per day. An eStore owner does not have to buy a dot.com or pay search engine fees, source page programming fees, or site storage costs. In addition, technical assistance is usually free or cheap. Should your site crash, call the owners, and he or she will fix it for you. One major disadvantage is that you must share all hits on your keywords with other members of the group. If ten members of the same Internet group shop deal in “Old Ivory china,” sharing hits on keywords will result in fewer sales for each eStore.
I find it fascinating that most dealers who display in traditional group shops do not advertise. By contrast, many dealers who sell in eStores purchase banner ads and keywords to drive business to their site. All Internet eStore providers offer inexpensive banner ads that cost about $10 per month. Such ads are programmed to display when certain keywords are typed into a search engine. Such banner ads really work. If you open an eStore, budget $25 per month ($50 is better) for banner ads within your site. The time to start an Internet business is now. Five years from now start up costs and ongoing expenses are likely to be too great for most small businesses.
Business on the Internet is always changing. Yahoo just paid $1.6 billion to buy Overture and therefore is likely to become the biggest search engine in the world. Microsoft’s MSN search engine is now at a major disadvantage. To protect their share of the search engine business, Microsoft could purchase several smaller search engines. I personally do not think this is likely.
Microsoft is sitting on a nest egg worth billions of dollars. This is owned, not borrow, money. I do not believe that Microsoft will settle for playing second fiddle to Yahoo. I believe that Microsoft will go after Google, the world’s number one search engine. Should this happen, the search engine business would be divided between two major corporations. With the competition all but gone, fees for search engine services will increase. The increase could price Internet selling beyond the ability of small antique related businesses to pay.